by Aaron Lazenby, February 2014
Walmart’s global reputation is built on giving customers access to a massive selection of quality consumer goods. And Rob Kaplan, director of product sustainability at Walmart, knows cost and convenience are what’s on customers’ minds when they walk through the front door of one of Walmart’s more than 10,000 stores.
“She has limited time and she’s spending an average of three to five seconds per choice in the aisle,” Kaplan says. “She’s thinking about price. She’s thinking about safety. She’s thinking about convenience. Sustainability is not a big consideration in those five seconds. That’s just the reality.”
Nevertheless, management at Walmart has made sustainability a priority to prepare for the next generation of customers who, according to Kaplan, will increasingly make environmental footprint a factor in their buying decisions.
Kaplan believes Walmart is uniquely positioned to meet the needs of these future customers. “There are very few places where you can work at the scale we do every day,” Kaplan tells Profit, citing the company’s 245 million customers and influence with global suppliers as a unique advantage for advancing the sustainability goals.
Walmart’s size and influence gives the company considerable environmental clout—and also presents some collaboration challenges. So Kaplan and his team worked with Oracle partner Solutions 4 Retail Brands to launch the SustainabilityHUB in January 2013. Built on Oracle RightNow Cloud Service, the HUB is a central location for Walmart suppliers, associates, and business partners to learn, connect, inspire, and drive sustainability through collaboration. The project, along with Kaplan’s efforts to improve Walmart’s supply chain efficiency, earned him Oracle’s Chief Sustainability Officer of the Year award, part of the 2013 Eco-Enterprise Innovation awards presented at Oracle OpenWorld in San Francisco.
Here, Kaplan talks about driving sustainability efforts across an organization of Walmart’s size, the idea behind the SustainabilityHUB, and strategies executives need to focus on to increase environmental leadership—and retain customers.
Profit: What makes Walmart an exciting place to work on sustainability issues?
Kaplan: I started my career in public policy and politics. I was a consultant in Washington DC and lived in San Francisco doing state-level California public policy advocacy work. I got really interested in the business case for the causes I believe in and the role private industry plays in a lot of public policy debates I was working on. So I decided to go back to business school and learn about this idea of corporate responsibility or corporate sustainability.
I was brought into Walmart to lead a program to reduce 20 million metric tons of greenhouse gas from our footprint—a goal we set in 2010, in partnership with the Environmental Defense Fund. That’s a very ambitious goal, and I get to work on that every day. I get to think about how we’re going to combat one of the biggest environmental challenges we’re facing as a nation and as a world.
I get to think about how we’re going to combat one of the biggest environmental challenges we’re facing as a nation and as a
Beyond that effort, we have three aspirational sustainability goals: to be powered 100 percent by renewable energy, to create zero waste, and to buy and sell sustainable products. We know what has to be done and we have created a pathway that includes big bets, some smaller but sure things, and a long tail of smaller projects. Doing that work, delivering on those goals—that’s what gets me excited about working at Walmart.
Profit: What challenges does Walmart face trying to share and measure sustainability best practices across a global supply chain?
Kaplan: For every category at Walmart—whether it’s laptops or bananas or breakfast cereal—there’s an individual who buys that product. And at Walmart, our buyers are kind of the CEOs of their own businesses. It’s up to those buyers how they want to manage sustainability.
So our focus really depends on each individual supply chain. In laptops, you’ve got eight suppliers. In berries, you’ve got 20. Cell phones are changing every day. Breakfast cereal is not really changing that much. Plus, the sustainability issues around factory energy efficiency in Shenzhen, China are completely different than those of corn growers in America, for example.
To help our buyers measure their performance, and to give them tools for integrating sustainability, we have created a retail scorecard called the Sustainability Index. The buyer now has a sustainability scorecard that shows, on a 100-point scale, how his or her category is doing. So the banana buyer knows, “I’m x number out of 100, and here’s how my suppliers are ranking, and here’s what factors are important to improving my score.”
We do provide an incentive: 5 to 15 percent of compensation is based on a sustainability metric. We leave it to the buyers to figure out how to then incentivize their suppliers. They might decide that they want to improve the scores of all their suppliers by 10 points, or focus on two suppliers that aren’t yet focused on any sustainability efforts—or even get all their suppliers together in a room to figure out how they are going to improve together.
Profit: What is the SustainabilityHUB, and how does it fit into these plans?
Kaplan: Walmart is a purpose-driven company: save people money so they can live better. That is an ethos everybody here lives and breathes. Sustainability is one lens that can really help us reveal the opportunities to achieve that purpose. We’ve seen that in several examples in our own operations and are now trying to answer the question “How do we bring that to the suppliers who bring us the products that we buy?”
We know that some of our big-time opportunities are around commodity grains and fertilizer, factory energy efficiency in China, and recycled content in plastics. But there are sustainability efficiency innovations happening in our business every day. A supplier might make a packaging reduction or logistics change that ends up having a sustainability benefit. Maybe it’s not enough for our team to focus on centrally, but we want to capture that. If you multiply that across 1,000 suppliers, you’re talking about a big impact.
So we built the SustainabilityHUB to allow suppliers to share that information in a scalable way with a low transaction cost. Then, we can recognize their contribution, make sure their buyer knows about their efforts, and provide tools that would empower our other suppliers to take advantage of those same improvement opportunities.
Profit: What was the core functionality the Walmart team needed for the SustainabilityHUB?
Kaplan: We have three operating principles for the hub: One is communicating purpose so buyers and suppliers understand why sustainability is important for Walmart and for them. The next is to collect best practices by providing toolkits on the hub as well as additional microsurveys to collect new information as we build the program. And then the third one is keeping it simple.
Oracle RightNow Cloud Service helps us do all this. It also provides metrics about how many people are accessing the hub, so we can determine what’s working and what’s not. When we send out an e-mail, we can measure the response rate so we can learn and tweak in the future. Our partner, Solutions 4 Retail Brands, helps advise us to make sure that we’re getting smarter as we go.
Profit: How has the SustainabilityHUB helped you reach your goal?
Kaplan: Here’s one example: We knew we needed to focus on fertilizer because it is probably the most greenhouse-gas-intensive input across everything we buy and sell. Nitrogen is 300 times more greenhouse gas intensive than carbon dioxide. But we don’t buy fertilized products, such as corn, wheat, and soy. We buy breakfast cereal, crackers, and baking flour. So how did we connect the dots?
We used the hub to create a crop-mapping survey that showed where the ingredients come from. To find that information, our buyers had to find the sourcing person responsible at a supplier’s company and build a relationship. This not only built bridges internally and raised awareness about our sustainability focus, but it gave us lots of valuable information about where to focus our efforts geographically.
Additionally, we’re now building a broader communication platform with all of the suppliers that have registered through the customer relationship management part of Oracle RightNow Cloud Service. Because we now have relationships with these suppliers, when we get the Sustainability Index scorecards, we can say to them, “OK, Supplier X, you have a big opportunity area because of your score in recycled content.” And then we can tell them about our recycled content program.
Profit: What are you looking to do next?
Kaplan: Walmart has already made some amazing progress. This year, we reported that we diverted more than 85 percent of our landfill waste globally.
Our big horizon conversations are about factories in China. By the end of 2017 Walmart will buy 70 percent of the goods it sells from suppliers who use the Sustainability Index to evaluate and share the sustainability of their products. And we’re going to continue to focus our thinking about how we make this a priority for our suppliers in China.
Another big opportunity I’m working on is customer engagement. The way we built the Sustainability Index is to improve the sustainability of every product in a category and every category in an aisle. Now, we need to figure out how to communicate this to the customer, so they know “Walmart is taking care of it. They’re bringing the most sustainable products to me that they can.”
Research shows this will be a part of how the next generation makes purchases. How do we build relevance with them over the next 10 years? That’s a huge part of the future.
Aaron Lazenby is editor in chief of Profit.